The West wants to set a higher price for Russian oil. Will there be an effect
According to Kennedy, Western countries should receive the market price of Russian oil from a buyer through a special agency, but pay only the cost of production to the Russian company, ie $ 20-25 per barrel, and the rest of the money should go to the Ukrainian Reconstruction Fund.
The United States and Europe are discussing setting a price cap for Russian oil in order to reduce the Kremlin’s funding for the war in Ukraine. Experts interviewed by RFE / RL’s Todd Prince say the move will not be effective.
Due to Western sanctions, Russian oil is now sold at a 30 percent discount on the global market. The price of a barrel of oil is $ 100-120. However, Putin’s government still earns more from oil now than it did before the occupation.
It can be discussed at the G7 summit
US Secretary of the Treasury Canet Yellen He said on June 20 that Western countries were working on a new strategy to reduce Russia’s oil revenues.
Oil accounts for about 30 percent of Russia’s federal budget revenues, and setting a maximum price could seriously affect the government’s ability to finance the war in Ukraine.
President of the United States Co Biden may discuss the issue at the G7 summit in Germany on June 26-28.
Some analysts say it will be difficult to control the price cap.
Insurance
“I think they cling to the straw,” he said. – Energy Analyst, Center for Strategic and International Studies, Washington Ed Chow he says. According to him, this idea “sounds good” on paper, but “will not have an effect in practice.”
Yellen said one way for the West to set a maximum price is to ban insurance for ships carrying Russian oil above a certain price.
Earlier this month, the European Union (EU), Russia’s largest energy consumer, approved a plan to reduce Russian oil imports by sea by December. By February 2023, imports of oil products from Russia should be reduced in this way.
However, China and India have seized most of the oil that the EU does not buy.
The EU and Britain have banned their companies from insuring Russian oil tankers.
Alternative policy
He is a fellow at the Davis Center for Russian and Eurasian Studies at Harvard University Craig Kennedy Earlier this year, the Kremlin proposed an alternative policy to reduce energy revenues while raising money for Ukraine’s reconstruction.
According to Kennedy, Western countries should receive the market price of Russian oil from a buyer through a special agency, but pay only the cost of production to the Russian company, ie $ 20-25 per barrel, and the rest of the money should go to the Ukrainian Reconstruction Fund.
The expert said the Kremlin was in a weak position in the deal with Brussels, as Russia’s energy infrastructure, railways, pipelines and ports are mainly designed for oil exports to Europe.
Prior to Russia’s occupation of Ukraine in February, it exported up to 4.5 million barrels of oil or oil products per day to Europe.
According to Kennedy, the Kremlin will have to sell oil mainly to China and India, which will account for more than 40 percent of the two countries’ oil imports.
Dilemma
Russia may face a dilemma: either sell oil to Europe at a fixed price, or wait for a price hike to break Brussels’ resistance by cutting production.
Kennedy and Chow say long-term production cuts will cause irreparable damage to oil fields.